Watchdog launches probe into EY over Post Office audits following Horizon scandal
The accountancy regulator has launched an investigation into Big Four giant EY’s auditing of the Post Office accounts, focusing on the Horizon IT system.
Public outcry broke out over the Post Office Scandal following an ITV drama that showcased hundreds of sub-postmasters who were wrongly prosecuted and convicted over faulty software developed by Fujitsu.
An inquiry into the matter started in 2022 but only commenced in December, with a full decision still pending.
As a result of civil legal action, the Post Office agreed to pay £57.7m in a settlement to over 500 sub-postmasters. The government took over the compensation scheme this year after Chancellor Rachel Reeves pledged some £1.8bn for Horizon compensation.
On Wednesday morning, the Financial Reporting Council (FRC) revealed it had launched an investigation into the Post Office’s statutory audits for the financial years beginning 29 March 2015, 27 March 2016, 26 March 2017, and 25 March 2018.
The target of the probe is auditor EY.
The FRC said it focused specifically on the role of auditors in meeting the standards that pertained at the time, and not the broader issues related to the IT system itself.
This decision was taken at a meeting of the watchdog’s board on 13 March, with the regulator noting “as not to interfere with the Post Office Horizon IT Inquiry” the opening of this investigation follows the conclusion of the public hearings.
The FRC said it has been actively monitoring the inquiry’s developments and awaits the formal inquiry findings.
However, as the Post Office is not classified as a public interest entity for audit regulation, the oversight is typically delegated to the relevant body, which, in this case, would be the Institute of Chartered Accountants in England and Wales (ICAEW).
However, the FRC stated that it had reclaimed this matter “given the heightened public interest considerations”.
This comes as figures seen by Morning Wire, revealed the FRC has fined the Big Four giants over £154m, pre-discount, over the last five years over audit failures.